Mohamed A. El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers in 2009, 2010, 2011, and 2012. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

The dissonance between academia, big business, and government in the U.S. is of such magnitude that the innovative grand bargain in Congress required to permanently avoid the fiscal cliff, as the People rightly expect, will never happen without a repeat of the Grand Depression of the 30s, because it would demand far-reaching changes in the current economic, social and political model tantamount to a new Social Contract, given the long-standing inequitable distribution of production, and gross imbalances in welfare, these being unstoppable changes which are not envisioned and much less discussed in the halls of power, and which must be, by their very nature, de facto. The model is obsolete; this is evident. The formal apparatus must yield and adapt, or it shall collapse.

"Politicians on both sides of America’s political divide have generally felt that compromise would be viewed as a sign of weakness."

But for that word "generally", this could be parsed to describe the reality of a handful of D hardliners up against a lockstep entirety of R hardliners. And, yes the Norquist pledge is instanced in the next sentence. Nevertheless, this paragraph reeks of politic false equivalence, a lack of which, no doubt, would be against PIMCO's interests.

Obama has earned just criticism for pre-emptive compromise. Let not his spurned efforts at collaboration and compromise be in vain. Do not call for more of the same. Not after his re-election. How many times do the Rs have to say no before they are rightly dismissed as the cynical vandals that they indisputably are.

"Such reforms require a grand bargain between America’s political parties, which in turn presupposes visionary leadership by both of them."

No grand bargain is required or needed. The US is having an election and after the election the Congress will start a slow lumbering process of deciding a variety of issues. That is the way the US Constitution has organized the place. Only elites interested in preserving the 15 percent capital gains tax rate talk about "grand bargains." Hey, it ain't American politics.

"the debt-ceiling debacle in the summer of 2011- which undermined economic growth and job creation..."

It did no such thing. The Republican House and Senate which refused to pass the Jobs Bill and other public infrastructure spending and a myriad of other jobs related bills undermined job creation. This was Mitch McConnell's strategy of undermining the economy so that Obama would be a one-term president. That is what undercut growth and jobs. It is a 100 percent Republican party responsibility. Why? The Republican party's sole and only goal in all of this is to preserve low tax cuts on capital gains and dividends. That's it. There's no other object on the Republican agenda. The rest of this is simple policy nonsense.

Let's not "appeal to game theory." It is old-fashioned hardball American politics.

The Republicans bet one way, and now it looks like they are going to lose. Tax rates will go up. Now we'll hear another stream of "sky is falling" from the financial elite.

In January 2013, a lot of Republican congressmen and senators are going to look at the fall 2014 elections and decide they don't want to be on the wrong side of Social Security, Medicare, and Medicaid. That will concentrate their minds. So no grand compromise, but there will be a lot "go along to get along."

If compromise is potentially a weak moral ground to be in, then ostensibly the American polity is gaming on a weakness for electoral rhetoric that leaves the vanquished to collect spoils from a moral debate meant for the public whose memory is shorter than the least count of recurring short cycles of recessions.

With an output gap that is potentially in the 6% of GDP, and with rising penchant for eternal bond buying that would keep the zero lower bound permanent, we have the fiscal deficit looming into a certainty of credit downgrade while the expectation that the rest of the world is worse off could be a saddening reminder that the global savings glut which fueled so much of the spending spree may not last.

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